USA Law and Practice Contributed by: Edward P. O’Keefe, Neil T. Bloomfield, John A. Stoker and Kathryn (Kate) G. Wellman, Moore & Van Allen, PLLC
providing credible challenge to management’s decisions and recommendations. The board should include an appropriate mix of executive directors and individuals who are inde - pendent of any relationships with the bank or management. The OCC’s heightened standards for banks with total assets of at least USD50 bil - lion require at least two independent directors. The OCC does not require that the chair be an independent director. Expectations for Bank Holding Company Directors The Federal Reserve Board has also established key attributes for an effective board of directors that are applicable to a BHC with total assets of at least USD100 billion. Boards are expected to: • set a clear direction for strategy and risk appetite; • undertake direct management of the board’s information needs; • oversee and hold management accountable; • support the independence and stature of independent risk management and audit functions; and • maintain a capable board compensation and governance structure. The Federal Reserve Board’s regulations also require each BHC with at least USD50 billion of total assets to have a board risk commit - tee responsible for approving risk manage - ment policies and overseeing the operation of an enterprise risk management framework. The committee must have at least one mem - ber with experience in identifying, assessing, and managing risk exposures at large, complex financial firms and be chaired by a director who meets defined independence standards. In addi - tion, the risk committee of a BHC with at least
USD100 billion of total assets must also review and approve a contingency funding plan for the BHC and any material revisions to the plan. The BHC must also have a chief risk officer (CRO) with experience in identifying, assessing, and managing risk exposures at large, complex financial firms. The CRO is responsible for: • oversight of the firm’s establishment and monitoring of enterprise risk limits; • implementation and compliance with risk management policies and procedures; and • management, monitoring, and testing of controls. The CRO is required to report directly to both the board’s risk committee and to the chief execu - tive officer. The CRO’s compensation must be consistent with its role of providing an objective assessment of risks taken by the BHC. State-chartered Banks State-chartered banks would be subject to any director or senior management registration and oversight requirements established by applica - ble state laws or regulations. 4.3 Remuneration Requirements Banks are required to implement safeguards to prevent excessive compensation to officers, employees, directors, or principal shareholders that could lead to material losses. Compensa - tion is considered excessive if the amounts are unreasonable or disproportionate to the services performed. In addition, federal bank regulators have issued guidance to assist banks in developing sound incentive compensation practices. Banks are expected to regularly review their compensa - tion arrangements. Compensation arrangements
627 CHAMBERS.COM
Powered by FlippingBook